If you financed a vehicle recently, you may be eligible for a new tax break when you file your return for tax year 2025. Car loan interest is now tax-deductible under the One Big Beautiful Bill Act, allowing up to $10,000 deduction for car loan interest from 2025-2028. Criteria apply for eligibility.

To qualify for the deduction, the vehicle must be for personal use, weigh less than 14,000 pounds, purchased new, and have a final assembly location in the U.S. Income limits apply, with full deduction for taxable income up to $100,000 for single filers and $200,000 for joint filers.

You can deduct the amount of car loan interest paid, not the total loan payment. Use the NHTSA’s VIN Decoder to confirm the final assembly location in the U.S. Lenders must provide a statement of interest paid for eligible borrowers. File Schedule 1-A with Form 1040 to claim the deduction.

The car loan interest deduction may not significantly impact your overall tax situation, but gathering the necessary details to claim it can reduce your tax bill or increase your tax refund. Electric vehicles qualify for the deduction if certain criteria are met. Business car loan interest is also tax-deductible.

Read more at Yahoo Finance: How to deduct new car loan interest under the OBBB